C-36/86

MINISTERIET FOR SKATTER OG AFGIFTER v DANSK SPARINVEST

OPINION OF MR ADVOCATE GENERAL LENZ delivered on 7 July 1987 *

* Translated from the German.

OPINION OF MR LENZ — CASE 36/86

brought proceedings to recover the capital that provision is a precondition for the duty it had paid and its claim was upheld by charging of capital duty within the a judgment of the Østre Landsret (Eastern meaning of the said provision or is a Division of the High Court) of 28 March Member State entitled to charge capital 1983. duty solely on the basis of an increase in nominal capital?'

'(1) Are Articles 10 and 11 of the Council Directive of 17 July 1969 concerning 7. 1. To begin with, it has to be recognized indirect taxes on the raising of capital that there is no dispute between the parties to be interpreted as meaning that, in that the respondent's Section C is to be respect of the transactions mentioned in regarded as a capital company within the Articles 10 and 11 it is not permissible meaning of Article 3 of Directive 69/335 for a Member State to subject capital and that therefore the question is how the companies, within the meaning of taxable events for the purposes of the Article 3 of the directive, to taxes or directive are to be interpreted in relation to duties other than capital duty and the a transaction such as the one at issue in the duties mentioned in Article 12? main proceedings. In any event the Højesteret has not asked whether the directive (Article 3 (1) (b) of which refers to (2) Is Article 4 (2) of the directive to be any company, firm, association or legal interpreted as meaning that an increase person the shares in whose capital or assets in company capital effected by a can be dealt in on a stock exchange) also transfer to it of the assets mentioned in covers legally independent sections of a company and there is therefore no need to 1 — Official Journal, English Special Edition 1969 (II), p. 412, consider any further that aspect of the case in the version contained in the Act concerning the conditions of Accession and the Adjustments to the which was touched on only towards the end Treaties (Official Journal L 73, Special Edition, 27 March 1972). of the hearing.

8. 2. All the parties have proposed an must be subject to capital duty while answer in the affirmative to the first paragraph (2) sets out those which Member question concerning the unlawfulness of States, if they consider it appropriate, may taxes other than those expressly mentioned subject to capital duty. It falls to be in it and with that answer one can only determined how Article 4 (2) (a) (which agree, bearing in mind the wording of the speaks of an increase in the capital of a three provisions referred to, considered in capital company by capitalization of profits the context of the directive's general or of permanent or temporary reserves) is to structure and recitals. be construed and whether it is sufficient for that purpsoe that there be an increase in the nominal capital (which is said to have occurred in the respondent's case, although there was no change in the structure of its

present case) Member States are not to subject to any form of taxation whatsoever the creation, issue, admission to quotation on a stock exchange, making available on 11. The latter interpretation was espoused the market or dealing in stocks, shares or not only, albeit primarily, by the respondent other securities of the same type, or of the in the main proceedings but also, essentially, certificates representing such securities, by by the Commission, although in a rather whomsoever issued. On the other hand, it more qualified way. The appellant, on the may be observed that by virtue of Article 12 other hand, proposes that the question be Member States may charge duties, notwith answered along the lines of the first- standing Articles 10 and 11. But it at once mentioned alternative and is supported in becomes apparent that none of these cases, this by the Netherlands Government which which are obviously intended to be takes the view that in the Netherlands such exhaustive, is of the slightest relevance to transactions (that is, the capitalization of the main proceedings. Finally, reference profits, reserves and permanent reserves on may be made to the last recital in the which duty has not yet been paid) would preamble from which it clearly emerges that certainly attract capital duty. Member States may not retain other indirect taxes with the same characteristics as capital duty or stamp duty on securities but must abolish them, since otherwise they might frustrate the purpose of the measures 12. (a) In my opinion a basic observation of provided for in the directive. considerable assistance in resolving this problem is that Article 4 of the Council directive, in which the transactions giving rise to capital duty are listed, is to be inter preted restrictively and that this applies in

OPINION OF MR LENZ — CASE 36/86

free movement of capital by similar taxatior 15. (b) On the basis of that position of more difficult. principle and the wording of Article (2) (a) (which is of particular importance in such a case), the conclusion which forcibly suggests 13. It may be thought that that conclusion itself is that when it refers to an increase of is justified in the first place in the light of capital by capitalization of profits and so certain observations of the Community forth Article 4 (2) (a) has in mind only cases institutions which took part in the adoption where a company has two separate blocks of the directive, namely the Economic and of capital (which are the subject of special Social Committee and the Parliament. Thus, entries in the accounts and, as the case may it is significant that in the opinion of the be, are entered in public registers) and Economic and Social Committee it was where as a result of a special transaction stressed that it should be possible to abolish there . is a transfer between the blocks of indirect taxes on the raising of capital, the capital, which also has an effect in company yield from which was low, and which no law vis-à-vis the outside world (so that longer had any place in a rational taxation shareholders can no longer have at their system, and it was also regretted that it was disposal the capital contributed in this way not possible to abolish capital duty as well, and therefore as far as the capital position is since there was scarcely any justification concerned there may be said to be from an economic point of view for taxing an increase in 'a comapny's economic the raising of capital. 2 Similarly, it is potential', as referred to in the judgment in significant that in a resolution of the Case 270/81 5). Parliament it was stated that the complete abolition of capital duties would be the best solution; as regards the proposed solution it was noted that it represented an essential step towards that objective. 3

MINISTERIET FOR SKATTER OG AFGIFTER v DANSK SPARINVEST

to the respondent in the main proceedings) making an alteration and would thus easily and if a resolution of the general meeting is escape taxation. They would be able (the required for the certificates to be altered, respondent has shown how by means of that does not in itself justify speaking of an certain examples annexed to its written increase in capital within the meaning of the observations) to influence the assessment to directive. On the contrary, if it comes to the tax according to the quotation which they taxation of such a transaction, it is Article sought and that certainly does not seem 11 of the directive which should be brought acceptable. to mind, which prohibits the taxation of the creation, issue and making available on the market or dealing in securities. 20. (d) On the other hand, nothing decisive emerges — let me go on to demon­ strate — from certain arguments put forward by the appellant in support of its 17. (c) It may yet be added that it certainly view. seems perfectly conceivable for increases in assets such as those which occur in an accu­ mulating fund also to be made subject to 21. That is true in the first place as regards capital duty. That would however clearly its reference to the fact that Directive require special provisions. Since the directive 69/335 (as Article 3 (1) (b), which has does not contain them and the computation already been mentioned, shows) covers all provision in Article 5 of the directive is possible capital companies (which is why, obviously not adapted to such a case, one according to the appellant, nothing decisive can only feel even more compelled to turns on whether, according to the conclude that transactions such as those accounting provisions, different bodies of falling for consideration in the main assets should be distinguished) and as proceedings are not covered by the regards its reference to Article 5 (1) (c) directive. according to which the nominal amount of an increase in capital is the determining factor.

Furthermore, it is clear that that provision called to give judgment would have been (which seeks to prevent the quoted value of relevant for the purposes of the earlier the securities issued on an increasing capital stamp duty law, that can provide no from being taken as a basis) is not so substantial assistance in interpreting the particularly well adapted to cover trans­ Community directive, because the directive actions such as those with which we are 6 is not based on the issue of securities and now concerned. because, according to it, to facilitate the movement of capital separate national 24. The same conclusion is called for as taxable events must be eliminated by regards the recitals in the preamble to the harmonization. directive (where in one passage it is stated that the harmonization of taxes on the 27. Finally, it is likewise irrelevant to refer raising of capital must be arranged in such a to the fact that the object pursued by the way as to minimize the budgetary reper­ respondent could also be pursued by a cussions for Member States) and as regards company limited by shares or that the fact that capital duty in Denmark (as is companies such as the respondent, as is apparent from the declaration made by the apparent from the evolution of legislation, Minister to the Parliament) has inter alia have from the tax point of view been replaced stamp duty (which plainly applied approximated to companies limited by to transactions such as those with which we shares or limited liability companies. are now concerned). 28. The essential point is precisely that the 25. The abovementioned passage in the respondent does not have the form of recitals certainly cannot in itself justify an company limited by shares but is structured extension of the taxable events provided for, in a substantially different manner (namely if only because — quite apart from the in such a way that there are no different necessity for a restrictive interpretation, as blocks of capital subject to different rules). became clear at the start — the recitals also Moreover, were the abovementioned show that it is of course not possible in evolution of legislation in fact to be every case to retain the status quo ante, and observed in Denmark (it is significant that this is obviously so in a process of harmon­ only an approximation of taxes was ization. mentioned) that of course would not justify the assumption that such an approximation 26. Although, on the other hand, it has to or assimilation was also regarded as appro­ be accepted that an exchange of certificates priate at the Community level, precisely in such as that on which the national court is the case of capital duty.